Evening star. [volume] (Washington, D.C.) 1854-1972, 1887-12-24
sen ssor Farwelrs bill for the peruetuat,ou Of tn

sen ssor Farwelps bill for the perpetuation OF the
national banking system, which was noticed at
some length In these columns the other day, has
since been widely discussed The most serious
criticism OF IL has come from the Senator's own
state, where Mr.. Lyman J. Gage, OF the First Ma
tional Bank OF Chicago, gave his opinion OF the
effect Of the proposed law In the west suppose,
said he, 'in q community In Kansas, Nebraska,
Iowa or Minnesota, the people feel the need OF a
bank They put together their funds and make a
capital OF 100000 When this Is done there Is, It
claimed, slO0.OO that may be loaned II such a
bank took out circulation railroad bonds, if you
please, t would deposit 100000 with the Govern.
ment for circulating notes, and would receive In
circulating notes $50 o00 II is plain enough that
10 such a case bank would only have $50, 900 to
Iosn the community where It Is situated instead
of 100000. and there would be q real depletion Of
lOanabe capital OF $4,000. II the rate OF interest
IN that community was ID per cent there would be
profit TO II In taking out circulation over lend
ing its capital direct without circulation. Circu
latiOn has now ceased to be a privilege TO all
western banks as IS evidenced By the fact that
S3o.OOO.0OO. more or less, have been surrendered
during the last year. II this bill became law,
and it left TO the banks TO avai themselves or
&c or not, II would probably be availed OF very
largely by eastern banks when the rate OF interest
was not above per cent, as there would be a
profit IN such Of about per cent In the trans
action
This is a fair argument from a western point OF
view, undoubtedly, and for the present day alone,
but IL does not seem 10 touch the real merits OF the
question. The law proposed by Senator Farweu Is
not expected TO be the creature OF q day, but
thing u stand for many generations. The national
banking law has now been In existence about
quarter OF a century, and, but for the unexpected
Tapidity with which the national debt has been re-
duced. would be available for a much longer time.
Whatever radical modification OF It may be made
at this time must be made with reference to its
continuance for n period twice or thrice as long,
unless some startling changes, not now possible to
foresee. occur In the conditions OF finance and
trade generally. In this respect MIR. Farwelrs
Dill has Its advantages, Its basis being elastic
enough 10 permit all the expansion necessary In a
country whose development Is proceeding so stead
ny by the aid OF rails and steam.
Now, the criticism OF Mr. Gage is founded on
the theory that the rate Of interest in the western
states Is going to continue indefinitely at 10 per
cent or higher. But this is begging the question
and In opposition to general experience. As
states become more thckly settled and more civil
lied, so that the risks attending Investments are
dimipished, their usury laws apt to become
stricter, or business makes laws for its
own government. From having q legal rate
OF interest with limit special contracts such
as Colorado. Nevada, and Arizona, Utah, Washing
10 have fixed limit for special contracts too be-
ginning with a high rate, like Dakotas Is per cent
and Idaho's "a, and then a lower like Nebraskas
and OreSon's twelve. At the next stage they lower
both general and special rates. as Michigan has TO
seven and ten, and Minnesota to seven and twelve
respectively. This progress is bound TO continue
and, as IL does, national banking on Senator Far
wells plan would grow steadily more and more
profitable.
Whatever fault is found with Mr. Farwell,s bin
must strike deeper than the criticism OF Mr. Gage
does IL must attack the main feature which is
the admission OF municipal and railroad bonds to
the eligible list at all That one point passing
muster, the willingness OF the banks to avail
themselves OF the privilege Of guaranteed circu-
lation may safely be left 10 take care Of ITSELF II
Is no part OF the governments duty TO provide
meshoos for the banks TO make money. But the
very existence Of a national banking and currency
system goes back for Its to the popular de-
Inand for circulating medium which will expand
or contract naturally In response to the fluctua-
tons or trades and IL Is precisely when the BANKS
md such q currency profitable that the people
want them 10 issue It, and, when they do not md
IL prontaols, 70 call IL In.